Financing is as important as a business plan. Because after all, how could you expand your business or turn it into a profitable reality when you have no funds to operate to begin with?
One of the most tried and tested methods of acquiring funds is through small business loans. This type of loan is specifically dedicated to all sorts of business purposes. But similar to other types of loans, it provides an individual or an entity the funds they need, and have them repay it with agreed terms and added interest.
You can take out a business loan from various banks and non-banking financial companies (NBFCs). But even before you consider applying for one, make sure that you avoid the following habits or situations to increase the chance of your loan approval.
No concrete business plan
Your need for instant money should not overshadow your responsibility to create a solid business plan. Of course you cannot predict the exact future of your company, but your business blueprint is still of utmost importance. It provides directions, attracts potential investors, and most importantly – allows you to predict your fund requirement.
The plan must include the following points:
- The purpose of your plan
- Your company profile
- Document of your expenses and cash flow
- Your marketing strategies
Applying for multiple loans
When you are looking for ways to start or expand your business, you’d probably enquire or apply for several loans, compare the terms and see which among them will offer the highest amount of money with the lowest interest rate. These multiple queries have a chance of putting a negative impact on your credit score.
To avoid this from happening, you can try making all your applications with the 45-day window period. This will make all transactions counted into a single enquiry for your credit score or only apply for one personal loan that will cover you.
Poor Credit History
Were you diligent in paying back your previous debts? Have you defaulted or filed for bankruptcy? These are some of the questions you should ask yourself before taking out a business loan.
A business loan might be your gateway to instant money for your small business, but your chances of getting approved might get delayed or rejected when you have a poor credit history. Your credit reports are the major factors to determine your credibility as a borrower.
Disregarding expert advice
Your prospective lenders would want to know if you’ve sought advice from established advisors. For small business owners like you, public or private accounting firms might be one of the best sources of financing tips.
Seeking expert advice not only helps you unlock new knowledges to help you grow your company, but also allows you to expand your personal network and meet seasoned individuals who have solid expertise in your field.
Doing a lot of research and having productive discussions with the experts are some of the most effective ways to boost your chance of securing a loan, but the best and most crucial part is still staying on top of your credit. Some of these make-or-break factors when securing a business loan might be hard to attain, but the success and convenience that they’ll bring to your business, in the long run, will be remarkable.